Correlation Between PT Solusi and Whitehaven Coal

Can any of the company-specific risk be diversified away by investing in both PT Solusi and Whitehaven Coal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PT Solusi and Whitehaven Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Solusi Bangun and Whitehaven Coal Limited, you can compare the effects of market volatilities on PT Solusi and Whitehaven Coal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PT Solusi with a short position of Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Solusi and Whitehaven Coal.

Diversification Opportunities for PT Solusi and Whitehaven Coal

-0.2

Correlation Coefficient

PT Solusi  Whitehaven Coal

Good diversification

The 3 months correlation between RU6 and Whitehaven is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Solusi Bangun and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal and PT Solusi is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PT Solusi Bangun are associated (or correlated) with Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of PT Solusi i.e., PT Solusi and Whitehaven Coal go up and down completely randomly.

Pair Corralation between PT Solusi and Whitehaven Coal

Assuming the 90 days horizon PT Solusi Bangun is expected to generate 8.2 times more return on investment than Whitehaven Coal. However, PT Solusi is 8.2 times more volatile than Whitehaven Coal Limited. It trades about 0.06 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about 0.0 per unit of risk. If you would invest  6.45  in PT Solusi Bangun on October 22, 2024 and sell it today you would lose (2.95) from holding PT Solusi Bangun or give up 45.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PT Solusi Bangun  vs.  Whitehaven Coal Limited

PT Solusi Bangun

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Solusi Bangun are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PT Solusi reported solid returns over the last few months and may actually be approaching a breakup point.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Solusi and Whitehaven Coal

The main advantage of trading using opposite PT Solusi and Whitehaven Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Solusi position performs unexpectedly, Whitehaven Coal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Whitehaven Coal will offset losses from the drop in Whitehaven Coal's long position.

The idea behind PT Solusi Bangun and Whitehaven Coal Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.